Tribune Media Co (TRCO.N) said on Thursday it had terminated a $3.9 billion deal to be acquired by Sinclair Broadcast Group (SBGI.O) and was suing Sinclair for breach of contract, after regulators objected to the acquisition that was supported by U.S. President Donald Trump.
The $1 billion lawsuit, filed in Delaware Thursday, said Sinclair knew it was taking a substantial risk by concealing from the FCC information about its relationships with certain buyers, putting undue pressure on the regulatory process and putting the merger at risk.
Tribune employees were notified that the deal was off in a lengthy early-morning memo from Kern that blasted Sinclair and said Tribune had done "everything it was supposed to do".
Sinclair, which owns 192 stations, said in May 2017 that it planned to acquire Chicago-based Tribune´s 42 TV stations in 33 markets in a deal that would significantly expand its reach.
As for Tribune's lawsuit, Ripley said Sinclair "fully complied with our obligations under the merger agreement and tirelessly worked to close this transaction".
Had the merger with Tribune Media been approved, Sinclair would have completely dominated the local news market. It's already the largest USA broadcaster by number of stations, with 192.
Additional reporting from Newsy affiliate CNN.
Sinclair initially announced plans to buy the media conglomerate fifteen months ago.
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Approval of the merger was widely considered inevitable because Trump's FCC chairman, Ajit Pai, is notoriously anti-regulation and pro-merger, and had rolled back ownership rules for broadcast media companies previous year in a manner that seemingly paved the way for the deal.
Sinclair Broadcast Group wanted the Chicago company's 42 TV stations and had initially agreed to dump nearly two dozen of its own to score approval by the FCC. The company that grew out of those ventures enjoyed explosive growth in the 1990s, particularly after the Telecommunications Act of 1996 eased media ownership rules.
Tribune pointed to the same problems that the FCC found in Sinclair's proposal to divest some stations in order to stay under federal ownership limits.
"In light of (the FCC order), this transaction can not be completed within an acceptable time frame, if ever", Kern said. "This uncertainty and delay would be detrimental to our company and our shareholders. and, by way of our lawsuit, intend to hold Sinclair accountable". The commissioners called into question whether some of Sinclair's proposed divestments were a "sham" because they were being sold to people so closely aligned with Sinclair and in agreements that would still allow Sinclair to operate the stations.
Sinclair also has become a significant outlet for conservative perspectives.
The merger was opposed by Democratic lawmakers, consumer advocacy groups, small cable companies, and Sinclair competitors. His administration has ties to Sinclair and when the FCC threw its curveball, he complained on Twitter, calling it "sad" that the deal seemed unlikely to go through.
"This deal would have contributed to the trend where "local" news and "local" programming is created or scripted out of town and is indistinguishable from cable news", Public Knowledge Senior Policy Counsel Phillip Berenbroick said today.